Italy aims to raise flat tax for rich foreigners by 50%

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Italy aims to increase its flat tax on the foreign income of wealthy individuals who relocate to the country by 50 per cent to €300,000.

The increase, if approved by parliament, would be a severe blow to rich expats seeking to escape higher levies elsewhere in Europe. 

Over the past decade, Italy, and particularly its financial capital Milan, has become a popular destination for the world’s super-rich, lured by the quality of life and tax incentives that allow them to pay a flat sum on all of their overseas income. 

But the scheme has been controversial among ordinary Italians, especially in Milan, who have blamed it for driving up property prices and contributing to a worsening housing shortage. 

A finance ministry official on Friday said the measure was included in Italy’s draft 2026 budget law that envisions around €18.7bn worth of tax cuts and social spending increases, including a tax reduction for lower and middle-income workers.

The budget draft also confirms Rome’s intention to raise more than €4bn from banks next year, after members of Prime Minister Giorgia Meloni’s three-party coalition hammered out a last-minute compromise on how to raise the revenues without imposing a windfall tax. 

“It’s a budget law that responds to the concrete needs and problems of families, businesses, workers of this nation,” Meloni told a press conference in Rome on Friday.

With Italy’s next general elections scheduled for 2027, Meloni is eager to alleviate the financial pressure on ordinary Italian families, whose purchasing power has been eroded by heavy inflationary pressures in the years since the Covid pandemic.

But with GDP growth expected to remain weak — at below 1 per cent for the next three years — Rome has been hunting for sources of revenue to keep the fiscal deficit below the EU’s 3 per cent threshold.

If approved by Parliament in the coming weeks, the new €300,000 flat tax will be levied on the overseas incomes of people who relocate to Italy once the new budget takes effect — expected to be in January 2026.

It will be the second increase in the scheme that was started in 2016 to combat ‘brain drain’. It has since lured many wealthy expats to Milan, especially as the UK tightened its “non dom” tax scheme.

Meloni’s government last year doubled the flat tax for new arrivals to €200,000. Giancarlo Giorgetti, the finance minister, then described the scheme as a “so-called flat tax for billionaires” and insisted Italy was still an appealing destination for the super-rich, even after the rise.

Under the current rules, a new foreign resident — or a returning Italian who has lived abroad for at least nine years — can pay a flat tax of €200,000 a year on any foreign income and assets for up to 15 years.

Other countries that have experienced increased interest from wealthy expats include the United Arab Emirates, which does not levy any personal taxes on individuals.

Monaco and Switzerland continue to be popular with the super-rich. While Switzerland is one of only three European countries to levy a net wealth tax, rich foreigners can make bespoke agreements with local cantonal authorities about the exact overall tax they pay on their income and wealth.